DURBAN, 25 June – Eskom Chairman Jabu Mabuza on Monday said it may have been “tactically wrong” to start wage negotiations with unions representing employees at the power utility at zero per cent.

“When you deal with the issues of wages, I think we could have handled this issue better as Eskom. It was perhaps tactically wrong to go in the negotiation chamber and say we are going to have a zero per cent increase. I think that was a bit wrong,” he said.

Mabuza – who also chairs Business Leadership South Africa (BLSA) – made the comments at the Oyster Box in uMhlanga on Monday morning.

He was responding to questions after a speech to BLSA Durban members by Phumzile Langeni, who is part of president Cyril Ramaphosa’s special envoy for investment. Langeni was updating members on Ramaphosa’s call to attract $100 billion in investment.

Mabuza said the decision of a zero per cent wage increase had come as Eskom chief executive, Phakamani Hadebe, announced that the company needed to look at cost cutting areas such as freezing posts, freezing salary increases and forfeiting bonuses.

“But because of the timing when he made that announcement, it was inside the chamber. So, unions on the other side, rightfully so, said we are coming with 15%, you are coming with zero, you are mad, you are arrogant,” said Mabuza.

Eskom two weeks ago rejected a salary increase of between nine and 15% that was proposed by the National Union of Mineworkers (NUM), National Union of Metalworkers of South Africa (Numsa) and Solidarity.

The company’s insistence on zero per cent saw employee protests throughout the country and take part in alleged acts of sabotage that led to sporadic loadshedding nationwide.

Public Enterprises Minister Pravin Gordhan had to step in to bring both parties back to the negotiating table, but Mabuza said that Gordhan had in no way decided on the 4.7 percent offer that the state owned entity eventually made to the unions, which was rejected.

Mabuza said the new Eskom board and the minister were “very clear” on where the authority of the board, management and the minister, as shareholder, lay.

“As chairman of Eskom, I think we have been quite clear when we came to office as to a proper role definition for all of the stakeholders here,” he said.

“We are all clear on those rules. We are very clear that part of the problems Eskom has been through had a lot to do with the conflation of these rules,” he said.

The company was in the “unfortunate situation” of having 48,000 employees today producing 47,000 MW of energy, as opposed to 36,000 people producing the same amount 10 years ago, he said.

“We have had a situation that the revenues have grown by an average of 12 percent over the 10 years, yet sales has grown by 0.1 percent. The World Bank has done a study that compares Eskom with other peer similar utilities and they said Eskom is twice the number of heads that it needs for equivalent sized type companies.”

He said that after “harmonising” the work done by the World Bank to include all of the extras that Eskom offers compared to its peers in the study, the company had found that “we may be a third of a bit overweight”.

In order to become a viable business again, Eskom had to review its sales and costs.

“Sales can’t be increased overnight, so you have to look at costs. Our costs are in two major areas, in our primary energy and labour costs. We are not able to collect most of the debt that is lying with the municipalities for a variety of reasons,” he said.

“The consequence of our pricing has led Eskom to the situation that very few people are still on our system. We actually had to pay people to come off the grid. So the challenge is we don’t have excess capacity but we have a situation where we have run out of clients that can pay. People are getting self-reliant, they are providing their own ways of generation.”

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